On July 29th, 2024, the Court of Justice of the European Union (CJEU) delivered its verdict in case C-39/23, concerning the compatibility of the Swedish withholding tax regime with EU laws.
This decision comes amid several developments in pension fund taxation. We will outline the key takeaways from this case and its implications for the pension funds industry.
The applicants were three finnish pension funds. The plaintiff used a state-owned swedish pension fund being tax exempt on dividends received by Swedish companies, as reference to demonstrate a violation of Article 63 TFEU.
Indeed, the swedish state-owned pension fund was exempt from tax obligations on the same dividends as the ones received by the applicants, subject to a 30 percent dividend withholding tax (which can be reduced to 15 percent under the double tax treaty concluded between Sweden and Finland). As they are in a comparable situation, they argued in front of the CJEU that the situation constitutes a breach of the free movement of capital under EU law and therefore a tax exemption on dividends received from Swedish companies by non-resident public pension fund applies.
Based on these information, Attorney General Collins recommended the CJEU on March 21st, 2024 to confirm that the Swedish withholding tax treatment of foreign public sector pension institutions constitutes a violation of the free movement of capital under EU laws.
On its final verdict, the CJEU issued a ruling in accordance with AG Collins' recommendation.
The Court noted that this difference in tax treatment between the Swedish public pension fund and the applicants was contrary to Article 63 of the TFEU, hence dissuading non-resident entities from investing in Swedish companies.
Indeed, despite several arguments from the defense stating that both types of funds were incomparable, the Court observed that the only notable difference between the Swedish and Finnish public pension funds is the place of residence, which make their respective situations objectively comparable.
This case has created new opportunities for privately-owned funds.
The court recognized discrimination between resident and non-resident pension funds in terms of tax treatment and established solid criteria for assessing comparability. These criteria can be used to reclaim withholding tax wrongly levied on Swedish dividends received by foreign private pension funds.
Moreover, if these private pension funds, directly or indirectly, act on behalf of public institutions, their chances of success will increase considerably.
Globe Refund successfully anticipated such positive judgments by filing claims for Swedish dividends received in 2019 by pension funds before their expiration date in 2024.
We anticipate successful claims to exceed €10 million.
If your organization also invests in Sweden through investment vehicles, you can still protect your investors' interests for the period 2020-2024.
We are available to provide a free detailed analysis upon request.
Our work focuses on providing outsourced withholding tax recovery services to safeguard your investments from over-taxation and save your time from burdensome processes.
